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Be Careful Not to Rush and REPEAT…

With the economy as it is, people are getting anxious. Business owners especially. After direct stimulus checks and the Payment Protection Program may be procurement stimulus. Think back to Franklin Roosevelt’s “Alphabet Soup” programs as an attempt to move our economy through the Great Depression. Effectiveness of these programs is a matter of historic debate, for our discussion it was an approach the government took before and may take again. Using government coffers to fund public sector projects to energize economic growth. Whether this will be at scales previously seen or if fanfare is made of it, we may never know. I anticipate an influx of government spending to buttress small businesses and the economy overall. FEMA and Army Corps of Engineers actions are examples. Here is the DANGEROUS opportunity to repeat history.

We can prevent history from repeating itself!!

A few years ago, after Hurricane Maria, FEMA awarded a contract to produce and deliver Meals Ready to Eat to the residents recovering from the devastation. Article. The headline is awful, but an opportunity for coaching. Digging deeper, this was a challenge of quality control and risk management. Under the surface, this small business likely didn’t confirm the specifications and their intended supply chain. FEMA included a specification to provide heating elements for the millions of meals. This was missed and not priced. Failures on both sides. Also, in her own words in a CBS News interview from Feb 2018, Ms. Brown acknowledges her subcontractor didn’t scale up to meet delivery timelines.

Government Contracting Officers have the responsibility to do what’s called an “Independent Government Cost Estimate” before the competition (Federal Acquisition Regulation 15.404-1). That estimate becomes the basis of comparison for all bids, establishing a competitive range. Bids outside a plus or minus 10% window are disqualified for not being “Fair and Reasonable”. Notice the red lines in the graph below. Missing a major specification such as a heating element MAY and possibly SHOULD have thrown out the small business since their price would have been unreasonably low…. creating an outlier.

On the other hand, the company is representing they know what they’re doing. We are all adults and SHOULD understand what we sign. Companies bear responsibility and now resulting repercussions of defaulting on a highly publicized contract. Unfortunate as it is, but this company becomes the scapegoat for a rushed contract action. Don’t get me wrong, both sides hold responsibility.

Think of it this way, in competition to build the next battle ship, the Navy receives a bid for $5.00. Award made? Sure, why not! Delivery day comes with much fanfare. Company CEO walks to the Contracting Officer and hands them a toy battleship from Walmart. The Federal Acquisition Regulations (15.404-1) are written specifically to prevent that farce.

Bottom line, we find ourselves in another similar crisis where pressure is remarkably high to DO SOMETHING. Companies need to be aware of these pitfalls or be damned to repeat past mistakes. You want to help. You want to win a contract.

Take a breath and read the contract. Make sure you understand what you are signing up for and that you can fulfill. Don’t expect to just work out the details later.

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